frustrated contracts

Question 1

What is frustration?

Answer 1

It can be referred to as subsequent impossibility- where a contract becomes impossible to complete after it had been formed. If a contract gets frustrated, it automatically ends.

Question 2

What are force majeure clauses?

Answer 2

Express terms in a contact which exclude liability where performance is not complete due to ‘extraordinary events’. This tries to avoid using frustration as courts are very reluctant to find frustration so this provides more certainty and protection for the parties.

Question 3

When does frustration apply?

Answer 3

Taylor v Caldwell- where a contact cannot be performed because performance has been rendered impossible, and this is through neither parties’ fault, the contract has ended and neither party is in breach.

Question 4

What are the 3 main types of frustrating events?

Answer 4

-Impossibility of performance
-Illegality
-Radical changes in the circumstances of the contract

Question 5

Why was the contract impossible to complete in Taylor v Caldwell?

Answer 5

Because the hall had burned down (been destroyed), it was no longer possible to have the concert there. This shows that if the subject matter of the contract gets destroyed, it is impossible to complete the contract.

Question 6

What happens if the subject matter becomes unavailable?

Answer 6

Jackson v Union Marine- here boat has not been destroyed, but it was not available to use and so the contract was impossible to complete. (Unavailable=impossible).

Question 7

What is the limit to the rule in Jackson v Union Marine?

Answer 7

Tsakiroglou v Noblee Thorl- Here the court held that the delay was not a frustrating event as the voyage could still be undertaken and completed in the stated time limit in the contact. The fact that it would be more challenging and be more expensive did not frustrate the contract.

Question 8

How does unavailability of a person work?

Answer 8

Condor v Barron Knights- The court said that his medical condition made it impossible for him to be available for 7 nights a week and so the contract had frustrated. Therefore the boy could be let go. The law for unavailability works in the same way for people as it does for goods.

Question 9

How does illegality work?

Answer 9

Denny, Mott and Dickson v James Fraser- If the law changes so that performing a contract becomes illegal, this will frustrate that contract. Here, the sale of the timer had been made illegal so the contract had been frustrated.

Question 10

What does a radical change in circumstances mean?

Answer 10

If a contract is made, then circumstances drastically change before performance, the contract may be frustrated as the contract has become pointless.

Question 11

Which case is an example where there was a radical change in circumstances?

Answer 11

Krell v Henry- because the purpose of renting was to watch the procession, the renting was now pointless because the procession would not happen. Therefore it had been frustrated due to a change in circumstances.

Question 12

Which case is an example where there was not a radical change in circumstances?

Answer 12

Herne Bay v Hutton- Here, hiring the boat has two purposes: to see the king and his fleet. Although he could not see the King, he could still see the fleet. Therefore the contract was not frustrated.

Question 13

What is the rule on inconvenient/ non-radical changes in circumstances?

Answer 13

If the circumstances have changed, but not to a large extent, this will not frustrate the contract.

Question 14

Which case is an example where there was an inconvenient/ non-radical change in circumstances?

Answer 14

Davis Contractors v Fareham UDC, The shortages were an inconvenient circumstance, but they did not change the nature of what the builder was expected to do in any major way (was contracted to build houses, and was still building houses).

Question 15

What are the limits to frustration?

Answer 15

-Foreseeable events
-Self-induced frustration

Question 16

What does the limit of foreseeable events mean?

Answer 16

Amalgamated Investment Property Co v John Walker- if the frustrating event could have been foreseen by the party, they cannot argue this frustrated their contract (like in this case with the old building being listed).

Question 17

What does the limit of self-induced frustration mean?

Answer 17

The Super Servant Two- if the frustrating event was due to a voluntary action/choice of one of the parties, the contract won’t be frustrated as one party was in control so it is their fault.

Question 18

What is the effect of frustration?

Answer 18

Frustration automatically ends a contract from the point of the frustrating event, the parties have no choice in this.

Question 19

Which act covers the effect of frustration?

Answer 19

Law Reform (Frustrated Contracts) Act 1943

Question 20

Law Reform (Frustrated Contracts) Act 1943

Answer 20

Money paid at the time or before the frustrating event is recoverable (minus expenses at the court’s discretion). Any money still to be paid ceases to be payable.

Question 21

What does s1(3) of the Law Reform (Frustrated Contracts) Act 1943 say?

Answer 21

Where no pre-payment was made or was payable before the frustrating event, but the party has partly performed the contract, some money may be awarded for the worth of that performance/ to repay any expenses.

Question 22

Which case shows that any expenses paid are at the court’s discretion?

Answer 22

Gamerco v ICM Fair Warning (Agency) Ltd- although the defendants had paid some money in preparation for the concert, the court allowed Gamerco to recover the full amount of money so there were no expenses.